The European hotel industry has stalled, with May being down compared to a record-setting month of April.The deceptive results registered in Germany weigh down upon the overall results. Nonetheless, medium-term perspectives remain favourable for the European hotel industry.
Each new month is different than the one that preceded it. The European hotel industry saw a bountiful month of April, with a rise in RevPAR near 10%, the best result in 5 years. May was more moderate, with revenue per available room down by 0.8% over the excellent year of 2004 (+5.2%). The budget categories are set apart from this downward trend. They continued along their route at a steady rate (+3.7% for the 2*). It is the midmarket and upmarket categories that negatively impact the monthly results, by posting drops of 1.5% and 1.4% respectively.Finally, the pale results registered in this month of May only lightly affected the medium- term trend. Over a 12- month period ending in May, RevPAR remains positively oriented (+3.2%) and the occupancy rate continues to rise (+0.5 points). Financial analysis institutes, including OCDE, recently adjusted their European GDP forecast downward in 2005 (+1.7% versus a previously-forecasted 1.9%). Despite this, the European hotel industry capitalises on the strong months (such as last April), and like the month of May, manages to limit the damage caused by more delicate months. We finally note that, according to the June 2005 INSEE note, economic growth in the Euro Zone should “strengthen in the second half of the year”; this may lead one to anticipate good business perspectives for hoteliers.This cool breeze in May over the European hotel industry mainly comes from Germany. After a record month of April (+22.7%), Germany posted a very low RevPAR for May (-17.1%). Some German cities still suffer from the problem of overcapacity, transforming even the slightest drop in demand to a price war. In other cities, the reason may originate in that there were fe- wer events than in 2004. This is notably the case in Düsseldorf, where the absence of the Drupa exhibition was unfavourable to hoteliers. Consecrated to the printing industry, this exhibition is held in the city every four years for a period of two weeks. This allowed hoteliers in 2004 to post very high occupancy and average daily rates.Another country that posted a drop in May: Belgium (-7.9%). In Antwerp for example, the month of May was not brilliant. Mario Rabbia, the General Manager of Radisson SAS explains these results by the year’s events, “The first week was marked by additional holidays taken around May first and Ascension Day”, though also by the heavy competition among hotels at that location. “Hotels in the outskirts of major cities are engaged in a price war, with average daily rates that may fall by up to 40%”. Finally, we note the drop in RevPAR in Spain (-4.1%) which stabilised its occupancy rate, though where hoteliers continued to be subjected to a high degree of rate competitiveness.To the contrary, a few countries did well in May, beginning with France (+2.7 in RevPAR) and the United Kingdom (+5.0% in RevPAR). In the UK, average daily rates continued to grow (+5.0%) without any major consequence on the number of hotel customers, which remained stable (at 75.3% on average). Once again this year, it is the Northern European countries that post by far the best results: +21.9% for Sweden and +23.7% for Denmark! Average daily rates strongly on the rise by more than 11% and 15% respectively are boosting the Scandinavian hotel industry. These large increases do not repel a demand that remains strong for these countries that are in a flowering economic Results are more divergent among the new EU member-states. Poland posted a rise in may (+5.1%). However, due to overcapacity, Warsaw remains a difficult market. In addition, the CFO of the Orco group fears an eventual negative fallout from European budgetary negotiations, for which Poland is one of the major beneficiaries. For its part, Hungary has seen a rise in its RevPAR of 12.1%. “Hotel development is stabilising. And the interest in the destination has increased”, explains Bertrand Caillard, CFO of Orco Group Hotel Collection, which owns the Andrassy in Budapest.
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